Tobacco

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Tobacco in Latvia

Aug 2014|Pages: 67

Price: US$1,900

About this Report

EXECUTIVE SUMMARY

Illicit trade affects all tobacco products

In 2013, no improvement in illicit trade was observed, as rates remained nearly unchanged in Latvia. As smuggling became centralised criminal activity, fighting it became a difficult challenge to the government. In cigarettes, illicit trade remained the major threat to performance and developments in economy and mid-price segments. Locals are still used to cigarettes and find them more convenient, as a result affordability of cheap illicit cigarettes does not make consumers more interested in smoking tobacco or low-end cigarillos. Illicit cigarettes makes growth of smoking tobacco more complicated, while fewer consumers are willing to smoke low-end cigarillos.

Legislative environment reveals signs of further stricter environment

There were no legislative changes that came in force in Latvia in 2013. However, the EU authorities had agreed on new pan-European regulations and related changes are expected in the upcoming years. According to the regulations, there will be new requirements for larger health warnings, restrictions on flavoured cigarettes and packaging size. The regulation also imposes requirements on the quality standard of electronic cigarettes, which were not regulated previously in Latvia at all.

Competition remains strong in Latvia

Some stronger competition was evident in tobacco in Latvia in 2013. Competition increased not only amongst the same category, but also became more noticeable cross categories. For instance, RYO tobacco started to compete more with cigarettes. This was also evident in terms of positioning of RYO tobacco. In cigarettes there was also development of soft packaging and packs with 21 sticks. However, while illicit trade remains high, no strong price wars are expected among major players.

New developments respond to need for better value-for-money

In RYO tobacco and cigars, there was the development of good-quality products that aimed to expand the consumer audience. For instance, the development of Utah and Stanislaw brands was observed, both of which offer good quality and price ratio. Moreover, Utah offers small packaging compared to other brands, which makes the product’s price the cheapest per packaging. A similar trend was observed in cigars, where one of the cheapest possible handmade cigars was introduced. In cigarettes, Chesterfield, which is one of the most popular brands in Latvia, offered 21 stick packaging.

Stable performance is expected over the forecast period

Over the forecast period, a stable performance is expected across different categories despite declining smoking prevalence and declining population. The major factor behind this is that the gradual decline in illicit cigarette sales could be expected. In addition to the government expected to pay more attention to this issue, improving purchasing power is also expected to allow a larger number of smokers to buy official cigarettes instead of searching for cheap illegal products.